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The Return of Hula Mae


Buying a home just got a little easier, thanks to a state program geared for owner-occupants

Home prices are down and interest rates are at an all-time low. But that doesn’t help if you’re strapped for cash and can’t come up with a 20-percent down payment.

Now for a bit of good news: If you are a family of three or more and have a combined household income of less than $114,240, you may be eligible for a 30-year fixed rate mortgage as low as 3.65 percent through the state’s Hula Mae Program – while also catching a break on the required down payment as well.

Hula Mae funds, which have not been available since 2009, became available again recently with the aim of offering an alternative, lower cost mortgage financing option to Hawaii’s low- and moderate-income families.

“Special interest rates that are below the standard market rates are one of the benefits associated with a Hula Mae loan,” says Joy Cabildo, vice president and division manager at First Hawaiian Bank, one of six Hula Mae lenders on Oahu. “For first-timers, it is a great opportunity.”

The income limit for Honolulu families of two or less is $97,920. Neighbor Islands’ income limits are slightly lower.

Made available through the Hawaii Housing Finance & Development Corporation, the Hula Mae Program is intended to make home buying more affordable for qualified families. You must be a Hawaii resident and a U.S. citizen. And eligible purchases include single-family homes, townhomes or condominiums purchased in the state. This program is not for investors – so these home cannot be rented out – or for anyone who has previously received a Hula Mae loan or has held interest in a principal residence for a period of three years prior to applying.

“One of the major requirements is that you cannot have owned any real estate in the past three years,” says Cabildo. “This program is only for owner-occupants, first-time homebuyers.”

In addition to offering low mortgage interest rates, Hula Mae loans have low down-payment requirements.

“The borrower needs to come up with 3 percent down,” says Cabildo. “It is a great loan for first-time homebuyers looking to buy a home, have some money to put down, and intend to stay there for the duration of the loan. It is not for investors or second home purchases.”

To be eligible to purchase a home on Oahu, the price cannot exceed $723,417.

One of the restrictions has to do with selling the home. Since the Hula Mae Program grants borrowers loans that are financed from proceeds of tax-exempt bonds as well as a lower interest rate than is customarily charged, buyers may owe money if they sell their home within the first nine years.

Known as the “recapture clause,” you may owe more in federal income taxes in the year in which the sale was completed – depending, of course, on the gain realized.

“Meaning you will need to pay back these savings if you do not keep your home owner-occupied for the minimum period,” says Cabildo.

Leasehold properties can be purchased with a Hula Mae loan as long as the lease term is at least 35 years and the lease rent is fixed for at least 10 years from the date of the mortgage loan.

To find out if you meet qualification criteria for a Hula Mae loan, check with your personal banker at First Hawaiian Bank. It is always recommended that you talk with your loan officer first to find out how much of a loan you qualify for before starting to shop.

Hula Mae financing cannot be used to refinance existing mortgages or on lease-to-fee conversions. For more information, contact First Hawaiian Bank at 643-HOME (4663).

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